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Updated December 30th, 2023 at 13:04 IST

Nifty posts 20% return in 2023 driven by political stability, strong macros

The substantial wealth creation is attributed to factors such as impending elections ensuring political stability, positive indications of rate cuts in 2024.

Abhishek Vasudev
Sensex
The Sensex ended 2023 at 72,240 and Nifty 50 settled at 21,732. | Image:Republic
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The Sensex and Nifty exhibited robust growth in 2023, surging 18.73 per cent and 20 per cent, propelling investors to witness a staggering Rs 81 lakh crore increase in their wealth. The phenomenal year for the equity market was fuelled by a confluence of factors, including India's strong macroeconomic fundamentals, political stability Bharatiya Janta Party's (BJP) state election victories, optimistic corporate earnings outlook, hints of potential US Federal Reserve rate cuts, and substantial participation from retail investors.

The Sensex ended 2023 at 72,240 and Nifty 50 settled at 21,732.

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The substantial wealth creation is attributed to factors such as impending elections ensuring political stability, positive indications of rate cuts in 2024, and a decline in energy prices luring foreign investors back into the market.

On November 29, 2023, the combined market valuation of BSE-listed companies reached a historic $4 trillion, reflecting India's economic growth, resilient domestic macros, and improved global conditions.

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The BJP's decisive triumph in state elections further bolstered investor confidence in political continuity beyond the 2024 Lok Sabha elections. Buoyed sentiments were already supported by a healthy trend in corporate earnings growth and resilient domestic macros.

The BSE Sensex reached an all-time high of 72,484.34 points on December 28, recording monthly gains in eight out of twelve months. A broader market rally, especially in midcap and smallcap stocks, contributed to the overall optimism. The Nifty Midcap 100 index surged 45 per cent, while the Nifty Smallcap 100 index climbed 55 per cent during the year.

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Despite earlier concerns such as global monetary tightening and geopolitical issues, the Indian market demonstrated resilience, thanks to the robust performance of the economy and positive corporate earnings.

"Nifty-50 has delivered gains of 20 per cent in 2023 and is one of the best performing equity market in the world and returns are far ahead of China at -14 per cent, Thailand -15 per cent, Hong Kong -14 per cent in 2023. Indian market provides one of the highest EPS growth rate at 13 per cent YoY and 14 per cent YoY for FY24, 25E respectively and performance is also supported by outcome of state election result of December 2023. This has raised hope of continuity of same government in upcoming central government election in May-24," said Vishal Periwal, head of institutional research at IDBI Capital.

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“From flows perspective, domestic/retail flows has been positive with systematic investment plan (SIP) flow of Rs 16,000 crore on monthly basis and importantly FII flow has also turned positive for India,” Periwal added.

Tata Motors emerged as the top Nifty gainer with a remarkable 100 per cent gain in 2023. Other notable gainers included Bajaj Auto, NTPC, Coal India, Tata Consumer Products, Larsen & Toubro, and Hero MotoCorp, rising between 50-88 per cent.

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“Despite India's valuation at 20 times 12-month forward EPS, a premium to historical averages, the attractiveness of the Indian equity market has heightened, driven by the rapidly growing economy, progressive policies, and stable outlook compared to other countries,” Periwal added.

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Published December 29th, 2023 at 16:16 IST

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